Auto Insurance for a Used Car

There’s already a lot to think about when you shop for a used car, but don’t forget to add auto insurance to your checklist. Even though used cars can be considerably cheaper than new models, they can still leave you with big bills after an accident. Here are the key things you need to know about getting insurance for a used car.

Do I need insurance before I buy a used car?

It’s generally best to have insurance in place for a used car on the day you take possession, whether you purchase the vehicle from a dealership or a private seller.

Under either scenario, once the car is signed over to you, you are financially responsible for the vehicle, including injuries or damage you may cause while driving it.

It’s also illegal in most states to drive without insurance, and most states require you to provide proof of insurance to register the vehicle in your name.

If you already have car insurance, your existing policy is likely to provide initial coverage during its grace period for up to a week or a month. Since terms vary by company, it’s best to check your policy or contact your insurance agent for details.

You’re still required to notify your insurance company of the purchase as soon as possible so it can add the vehicle to your policy and, if necessary, remove your trade-in.

If you’re financing the car, your lender is likely to require your existing or new policy to include collision coverage and comprehensive coverage.

How to get insurance before buying a used car

It’s relatively easy to obtain and compare insurance quotes for a used car before you finalize your purchase.

You can get the most accurate quotes by providing the car’s vehicle identification number (VIN) to the insurance companies you contact. If you don’t have the VIN handy, the year, make, model and trim level of the car, or cars, you are considering will be enough to get initial price estimates.

If you’re buying a new car insurance policy, make sure to schedule it to take effect on the date you plan to purchase the car.

Most expensive states to buy a used car

Buying a car — whether its new or used — is one of the biggest purchases most people make. New cars are often expensive, driving some consumers to consider used cars.

“Buying a used car is an excellent way to save money. If you’re trying to decide between a few models, consider getting insurance quotes before you buy to see how your premiums may affect the overall ownership cost of each one.” - Rob Bhatt, QuoteWizard Analyst

The price range to buy a used car in the U.S. is wide. To determine which states have the most and least expensive used cars, our analysts looked at the average cost of a used car and the average annual cost to insure it in each state.

Michigan is the most expensive state to own a used car. The primary reason for high prices in the state is the cost of insurance, $3,815 a year. To own a used car in Michigan, drivers can expect to pay around $6,594 a year, compared to the national average of $4,400.

Indiana is the cheapest state to own a used car, costing a total of $3,567 per year. It also has the cheapest average price of a used car, $21,961. The state with the most expensive used cars is Alaska, where it costs a total of $29,656 to buy such a vehicle.

How much does used car insurance cost?

The average cost of insurance for a used car is $157 a month for cars from the 2018 model year and $149 a month for cars built in 2015, according to our analysis of 20 popular models.

Used vehicles built in 2018 cost an average of 6% less to insure than comparable ones from 2023, and 2015 vehicles are 11% cheaper to insure than 2023 models.

The types and amounts of insurance you purchase go a long way toward determining your rate. For example, the average price of full-coverage car insurance, which includes collision and comprehensive coverage, is more than double the rate of policies that only meet their state’s minimum requirements.

Which used cars are cheapest to insure?

The GMC Canyon, Ford F-150 and Ford Escape are among the cheapest 2018 vehicles to insure, our analysis shows.

Used cars with higher market values tend to cost the most to insure, because they require insurance companies to pay out more in claims for total losses. This is one of the main reasons why older cars are generally cheaper to insure than newer ones of the same make and model.

However, your vehicle’s claims history is among the many additional factors that insurance companies also evaluate to determine your rate.

For example, a Mazda 3 has a higher value than a Nissan Sentra, but the Sentra has a higher volume of bodily injury claims than the Mazda 3, according to the Highway Loss Data Institute (HLDI).

Claims cost insurance companies money, and insurance companies pass these costs along to customers in the form of higher rates for cars with higher claims volumes. This is one reason why car insurance for a Nissan Sentra may cost the same driver more than insurance for a Mazda 3.

If you are interested in comparing the claims histories of different vehicles you are thinking of buying, you can find them on the HLDI website.

When it comes to used vehicles from 2015, the Ford Escape is the cheapest to insure, followed by the GMC Canyon and the Toyota Tacoma.

Which companies offer the cheapest used car insurance rates?

Among large national insurance companies, American Family, GEICO and Progressive offer the cheapest insurance rates for used cars.

However, you may be able to find a lower rate from a regional company, depending on where you live.

For example, Virginia Farm Bureau has the cheapest insurance rates for used cars in Virginia, while Texas Farm Bureau’s rates for used cars are lowest in Texas.

USAA’s rates for used cars are lower than those available from the major national companies in our analysis. However, USAA is only available to current and former members of the military and their families.

Is gap insurance worth getting for a used car?

Gap insurance is worth considering if the market value of your used car is lower than your loan balance.

If your car is ever declared a total loss, the most you’ll receive from the insurance company under your collision or comprehensive coverage is the car’s market value. However, if your loan balance is greater than your car’s value, the insurance funds won’t fully pay off your loan.

Gap insurance is an optional endorsement many insurance companies offer to cover the potential shortfall between your car’s market value and your loan balance.

Since some companies only offer it for newer cars, such as those from the past three model years, it may be hard to find gap coverage for an older used car.

Gap insurance vs. debt waivers

Gap insurance should not be confused with debt waivers, which are often called gap waivers and offered for loans originating at a car dealership.

With a debt, or gap, waiver, the lender forgives a potential shortfall between your insurance payment and outstanding loan balance, in the event your car is totaled.

Although gap insurance tends to be cheaper than debt waivers, you may not always have a choice. In certain situations, a lender may require a debt waiver to approve your loan.

However, if a debt waiver is offered to you on an optional basis, gap insurance may be a better deal.

If you need a loan that exceeds your car’s market value, consider asking the insurance companies you contact to include gap coverage in their quotes before you finalize your used-car purchase.

Methodology

Rates shown in this article are based on an analysis of insurance quotes for sample drivers in California, Illinois, Ohio, Texas and Virginia. Our sample driver is a 35-year-old male with a clean driving record who drives an average of 13,500 miles a year.

Vehicle values were obtained from Kelley Blue Book, using price estimates for base models with average mileage in good condition.

Unless otherwise stated, prices reflect the average between minimum- and full-coverage car insurance for each listed vehicle. Minimum-coverage policies meet each state’s minimum required limits for liability coverage, as well as uninsured motorist coverage in Illinois and Virginia.

Full-coverage policies include minimum uninsured-motorist limits, where required, as well as the following coverages, limits and deductibles:

• Bodily injury liability: $100,000 per person/$300,000 per accident
• Property damage liability: $100,000
• Collision: $1,000 deductible
• Comprehensive: $1,000 deductible

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